Easiest Method To Budget

So, you want to budget your money eh? Well, you've come to the right place! Despite me being from Canada (eh?), this method works for anyone, anywhere around the globe! The best part? It's super easy! You're going to laugh at how short this post is. By the end, you should be set up so that you're never short on money again (unless you lose your job).

In a nutshell, we're going to calculate how much you spend each year, and then were going to spread that out evenly over your income. It'll make more sense when we get into it.

First thing first, we need to figure out how much you spend every year. Add up all your expenses. Take a look at this sample list and make sure you leave nothing out. Don't worry about savings, food, or "fun" things just yet, this is just for the bills you get on a regular basis. Note these aren't my exact expenses, it's just an example:

-Car Payment: $300/month x 12 months in a year= $3,600 per year

-Car Insurance: $100/month x 12 months in a year = $1,200 per year

-Fuel: $60/week x 52 weeks in a year = $3,120 per year

-Mortgage/Rent: $800/month x 12 months = $9,600 per year

-Heat/Power: $200/month x 12 months in a year = $2,400 per year

-Water Bill: $100/month x 12 months in a year = $1,200 per year

-Internet/TV: $100/month x 12 months in a year = $1,200

-Student Loan: $150/month x 12 months in a year = $1,800 per year

-Line Of Credit/Credit Card: $150/biweekly x 26 payments in a year = $3,200 per year

-Loan: $125/month x 12 months in a year = $1,500 per year

In the example, I would have $28,820 per year.

Now, we have to divide this number into the number of times you get paid per year. If you get paid monthly, you divide by 12. If you get paid biweekly, you divide by 26. And if you get paid weekly, you would divide by 52. Where your income comes from, if its online work, a 9-5, or stipend cheques from the government, it doesn't matter. For the sake of the example, let's say I get paid biweekly. $28,820 divided by 26 is $1,108.46

So, in a nutshell, I would have to set aside $1,108.46 every paycheque for my bills. It helps if you have a second account (another chequing account, or a savings account with direct withdrawal options). That way you can set that money in that account and forget about it. Whenever you have a bill, just pay it out of that account (or have it withdrawn directly from that account). This isn't mandatory, but it does make things a lot easier.

Okay, so we've covered the mandatory payments. Now for the rest. Let's say I get around $1,500 every payday. After setting aside my $1,108.46, I'm still left with $391.54

You can disperse this money however you like, but I like to do it evenly. Since I also need food, and it's a good idea to have an emergency savings, and I want to have some money I can use to go out and do fun things with; I need to divide what's left into the 3 'extra expenses'. So I would use $130 for groceries, I would set aside $130 in a savings or investment account, and I'd keep $130 on me in case I decided to go out. Of course, if you wanted; you could be frugal with coupons, spend only $100 on groceries, do free 'fun things' like the park, and put $290 into your savings. It really is up to you how you spread the remaining money. The most important thing is that you don't forget to buy food. You need to eat.

That's it! Now you never have to worry about how much you can spend after payday, you'll know exactly what needs to go to bills, and how much is left to enjoy however you please :-)

I hope that explains everything, but if I left something out, you're confused, or you have other questions, don't be afraid to drop a comment!